In 2012 we invested in a company that was being spun-off from another. The original company was an ecommerce platform for technology products. It was run by a great CEO with tremendous drive and hustle. A friend of his asked if he could sell cellphone minutes on his webpage. Hesitant, thinking he would not sell at all and that it would probably ruin the user experience of his current platform, he decided to accept because he wanted to help his friend. To his surprise the sale of minutes skyrocketed! The small amount of marketing dollars he would spend would return huge results in sales.
When analyzing his clients, he realized that most were US Hispanics, living in the US who were buying cell phone minutes for their families back in Mexico. This was a cheap way to send money to Mexico and a great way to keep in contact and communications with family members.
Remittances is a beastly market in Mexico, I don’t remember what the numbers looked like in 2012, but today the remittance market in Mexico is USD$33B, with growth rates in the double digits and represent close to 3% of the country’s GDP.
So, when they came to DILA to present the plan of separating the companies and creating a new company specifically for the remittance business, it passed through our filters and investment committees without a problem. We led their seed round.
Once operations were in place and the two companies were operating in parallel, everything seemed great; sales were growing every day and we were creating different products to sell to our clients. There was one problem: the CEO was dividing his time between the two companies. We believed he was not dedicating enough time to our business and he could not leave his original business unattended, specially since it was doing very good as well.
In 2013, crisis emerged. His original technology company closed a multi-million-dollar B2B distribution contract. The CEOs undivided attention was now full on the original business and no one was running the remittance company. We tried to hire top management, we tried to sell the company, but eventually it faded and disappeared. This is one of the few write-offs we have had in DILA.
In DILA we invest in people. That is our job and our passion. We certainly analyze business plans, measure the size of markets and run sensitivity analysis on certain variables in the business model, but in the end, we invest in the people running the show. It is therefore extremely important for the team to be dedicated, heart and soul, full time to the business in which we are investing in.
Like in all failures, many lessons learned. And in this case, we learned the importance of teams, the importance of dedicated work and focus. Today in DILA we do not invest if not in holding companies. We do not invest in companies where the top management is not dedicating 100% of their time. It is fine to have other passions and hobbies, but if you dedicate your work time to anything outside of the business you are inviting us to invest in, we will not invest. We need focused teams that are dedicated full time to the business we are putting our money in.